Statement of Policy and Procedure
Policy No.
Department Ownership
Issue/Effective Date
[Sample] First Nation
Cash Management and Banking Policy
Approved by Council on ___________________
Sample Policy:
Issue Date:
No. 14
April 1, 2013
Implementation Note:
Visit our website at http://www.fnfmb.com to ensure the SPP issue date shown above is the most recent version.
NOTICE TO USERS
This document is intended for use by first nations in Canada. It provides a sample statement of policy and
procedures (“SPP”) that meet requirements contained in both the Financial Management Systems\ Standards and
Financial Administration Law Standards established by the First Nations Financial Management Board (“FMB”)
under the First Nations Fiscal Management Act (“FNFMA”). The policy and procedures are also consistent with the
provisions of the Sample Financial Administration Law issued by the FMB. It should be adapted to fit the specific
circumstances of your First Nation as it provides scope and flexibility for implementation. For this reason, it is
recommended that professional advice or assistance be obtained in order to conform to your First Nation’s
financial administration laws, culture and operating environment.
This SPP is part of a collection of sample policies developed by the FMB to assist first nations with compliance with
laws respecting financial administration. These and other sample documents are available for download at no cost
from the FMB website. For access and more information visit the “Core Documents” page at www.fnfmb.com.
FORMAT AND STRUCTURE
The sample policies and procedures developed by the FMB are based on a standard format. Users can customize
the format using language and procedures that fit their first nation’s needs.
1)
2)
3)
4)
5)
Policy – A clear statement that indicates the first nations protocol or rule affecting the specific area.
Purpose – The reason or rationale underlying the policy and procedure.
Scope – The areas, functions, individuals, or departments affected by the policy.
Definitions – Any specialized terms that are not otherwise defined
Responsibilities – Describes who, using generic titles or positions which are used in FMB Standards, is
responsible for implementing or maintaining the policy and procedures.
6) Procedures – Describes the steps, details, or methods to be used to implement and maintain the policy and
procedures.
7) References – List of applicable documents, policies, laws, and regulations etc. that are used to develop or have
influence on policy.
8) Attachments – The forms, reports, or records that are generated from policy.
DISCLAIMER
While the FMB has used its best efforts in developing a sample policy that can be used by a broad range of first
nations, it makes no express or implied representations or warranties with respect to the accuracy or
completeness of the contents of the sample policy or its suitability for a particular First Nation. This SPP has been
developed to conform to the requirements of FMB’s Financial Management System Standards and Financial
Administration Law Standards as of the issue date shown on the cover of this policy. Users accept that FMB
Standards and the FNFMA, under which those Standards are made, may be revised from time to time and
therefore it is advised that users check the FMB website for the most updated version when considering the
adoption of this sample SPP.
This SPP is a sample only. The FMB accepts no liability whatsoever for any damages caused by, or arising from, the
use, adaption or implementation of this SPP. First nation users of this SPP retain full responsibility for ensuring that
their own policies and procedures meet the needs and requirements of the first nation.
[ Sample] First Nation | Cash Management and Banking Policy
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1. Policy
It is Council’s policy to establish effective and efficient controls for all banking activities including
signing and approval authorities, opening and closing of accounts, processing transactions,
borrowing funds, and entering into financial service agreements with Financial Institutions.
2. Purpose
The purpose of this policy is to specify authorities and responsibilities over banking activities and to
ensure that all bank accounts with financial institutions are properly authorized and accurately
reported in the books and records.
3. Scope
(1) This policy and procedure applies to Council, the Senior Manager, and the Finance Department.
(2) In addition to the responsibilities identified within this policy and procedure document, the
following transactions or decisions must comply with their related policies and procedures:
(a) any bank loans or other forms of debt must comply with the First Nation’s debt policy;
(b) Accounts receivable policy;
(c) Accounts Payable policy.
4. Definitions
“cash” is currency, cheques, money orders, and credit card transactions.
“financial institutions” means the First Nation Finance Authority, a bank, credit union or
caise populaire.
5. Responsibilities
(1) Council is responsible for:
(a) approving the addition or the removal of authorized signatories for each financial
institution account used by the First Nation including band controlled enterprises;
(b) designating the financial institutions that the First Nation may conduct banking activities
with;
(c) approving the establishment of an operating line of credit or overdraft account.
(2) The Senior Finance Officer is responsible for:
(a) representing the First Nation in dealing with financial institutions;
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(b) approving financial service agreements with financial institutions;
(c) controlling the opening , maintenance and closing of any of the First Nations bank
accounts;
(d) ensuring that adequate segregation of duties is maintained;
(e) ensuring physical safeguards are implemented over cash;
(f)
approving bank reconciliations;
(g) monitoring and forecasting the First Nation’s cash position;
(h) liquidity management or managing the credit line facilities.
(3) The Finance Staff is responsible for:
(a) receiving cheques and cash receipts and ensuring they are accurately recorded and
deposited in a timely manner in the correct account at appropriate financial institution;
(b) preparing cheques for payment from the appropriate bank account;
(c) ensuring that all bank accounts are accurately reconciled on a timely basis and that
appropriate supporting documentation is obtained for each reconciliation;
(d) performing a reconciliation of petty cash on a regular basis.
(4) The Finance and Audit Committee is responsible for ensuring significant irregularities from the
reconciliation process are investigated.
6. Procedures
Bank Relations
(1) The Senior Financial Officer maintains correspondence and official documents relating to the
opening, maintenance, and closing of all First Nation and band owned enterprise bank accounts.
(2) The Senior Financial Officer is the First Nation’s primary representative in dealing with financial
institutions and at least annually provides the financial institution officials with necessary financial
reporting information and updates on the First Nation operations and forecasts in order for the
financial institutions to respond to the First Nation’s financial service requirements.
(3) The Senior Financial Officer is the only individual authorized by Council to negotiate financial service
agreements on behalf of the First Nation.
Cash receipts
(1) The person recording cash receipts in the general ledger will not be the same individual making the
deposit at the financial institution.
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(2) Cheques received by direct mail will be recorded in a receipt log and endorsed (stamped) as “for
deposit only” by a designated person.
(3) The cheque receipts log will be delivered to the Finance Department person responsible for the
accounting entries. This person will reconcile the remittance/ deposit slip and the cheque receipts
log.
(4) The person making the deposit at the financial institution provides the remittance/deposit book to
the Finance Department person responsible for the accounting entries.
(5) Cash received will be recorded in a duplicate receipt book. One copy will be provided to the payee
submitting the cash and the other will be forwarded to the Finance Department person responsible
for the accounting entries.
(6) All cash received will be stored in the First Nation corporate safe until it can be deposited in a
financial institution which must be done as soon as practicable and at least weekly.
Petty Cash
(1) Petty cash fund(s) must be maintained as cash on hand with the following procedures:
(a)
the creation of a petty cash account must be approved by the Senior Financial Officer;
(b)
the total amount of the fund will not exceed $300.
(c)
The person responsible for the security of the fund will maintain an activity log,
supporting documentation, and reconciliation.
(d)
petty cash funds and supporting documentation (vouchers, receipts) must be kept in a
safe location (locked drawer or safe)
(e)
Accounts payable will replenish the fund only with complete documentation and fund
reconciliation.
Cash Disbursements
(1) No accounts payable personnel, or the person authorized to print out cheques, shall be authorized
to sign cheques or approve money transfers.
(2) No one person or employee will be allowed to enter invoices, select invoices for payment and then
print and sign cheques. At minimum, this process requires at least two individuals to ensure the
integrity of the accounting system remains intact.
(3) Cheque signers will not sign blank cheques under any circumstances.
(4) Signature plates and signature stamps shall be stored in the corporate safe at all times other than
when printing cheques.
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(5) All blank cheque stock will be stored in a locked cabinet or in the corporate safe.
Bank Credit Lines
(1) The Senior Finance Officer will authorize the draw down on any bank line of credit or overdraft
facilities.
Opening a Bank Account
(1) A written request to open a First Nation financial institution account must be reviewed and
approved by the Senior Financial Officer and must include the purpose of the account.
(2) Once the financial institution account has been approved, the Senior Financial Officer or designate
prepares an account inventory form, which includes the following elements:
(a) Name of account
(b) Instructions regarding purpose of account
(c) Names of signatories and authority limits
(d) Address where all statements and correspondence is to be sent.
(e) The contact person or department at the financial institution.
(a)
The account establishment letter must be signed by any two of the following: the Senior Manager,
the Senior Finance Officer and any Councillor with signing authority.
(b)
The financial institution accounts will be created such that all non-deposit transactions (such as
cheques, electronic transfers, etc.) require two signatures for approval according to the Delegated
and Assigned Responsibilities Policy.
(c)
Once the financial institution account is opened, the Senior Financial Officer notifies the appropriate
Finance Department personnel to activate the account in the general ledger.
Closing a Bank Account
(1) A written request to close a First Nation financial institution account must be reviewed and
approved by the Senior Financial Officer.
(2) The request to close must include:
(a) Name of account
(b) Financial institution Account number
(c) Closing bank balance and statement
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(d) Approval by appropriate First Nation personnel (i.e. accountant for band owned
enterprises)
(3) Upon approval, a financial institution account closing letter will be prepared and delivered to the
financial institution with instructions to transfer any remaining account balance. The letter will be
signed by at least two authorized signatories of the First Nation.
(4) Once the financial institution account has been closed, the Senior Financial Officer notifies the
appropriate Finance Department personnel to deactivate the account in the general ledger.
(5) A list of anticipated ongoing deposits will be maintained and reviewed on a monthly basis. Any
expected deposits that have not been deposited in the financial institution account(s) will be
reported by the accountant to the Senior Financial Officer immediately.
Bank Reconciliation
(1) Each of the First Nation’s financial institution accounts will be reconciled to the accounting system
records on a monthly basis within 30 days of the end of the month.
(2) Reconciliation records will be retained. Documentation to support the amounts recorded on the
reconciliation, such as accounting system general ledger reports, financial institution statements,
outstanding cheque reports, etc., will be included in the reconciliation file.
(3) The employee preparing the financial institution account reconciliation will monitor and investigate
adjustments that carry over from month to month.
(a) Outstanding cheques will be monitored and any cheques outstanding for more than 4
months will be investigated with the employee responsible for preparing cheques (i.e.
Accounts Payable) to determine whether the cheque remains valid or if it should be staledated.
(b) In transit deposits will be investigated immediately if not cleared by the financial
institution within one week.
(c) Other adjustments that are routine in nature will be entered in the financial system
through the journal entry process.
(d) Unusual, or unresolved entries that carry over for more than one month, will be reported
to the Senior Financial Officer.
(4) The employee preparing the reconciliation will sign it as evidence that the reconciliation is complete
and that they have carried out their duties as described in this policy.
(5) Online financial institution access will be permitted and controlled as follows:
(a) the employee performing account reconciliations will be granted read-only access to the
account he/she has been assigned to reconcile;
(b) only employees with signing authority will be provided online banking access to perform
transactions;
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(c) ability to complete transactions, such as electronic funds transfers, will be controlled in a
similar manner as cheques. Two employees will be required to approve each transaction.
Each employee will have a separate login and individual password.
Independent Review
(1) The Senior Financial Officer will review and approve each financial institution account’s
reconciliation for completeness, timeliness and accuracy. The Senior Financial Officer will review to
ensure the following:
(a) the reconciliation balances;
(b) all amounts recorded on the reconciliation are appropriately supported by documentation
such as financial institution statements and financial system reports;
(c) adjustments are reasonable, routine in nature (e.g. financial institution fees), supported
by documentation, and are not carried over for multiple months on the reconciliation;
(d) unusual adjustments are well explained, supported, and, if material in nature, are brought
to the attention of the Finance and Audit Committee.
(2) The senior financial officer performing the independent review will sign and date the reconciliation.
Irregularities
(1) Irregularities, such as significant reconciliations that do not balance or unusual adjustments, will be
reported by the Senior Financial Officer to the Finance and Audit Committee as soon as practical.
7. References and Related Authorities
(1) FMB’s Financial Management System Standards
(a) Standard 18.1 – Financial Institution Accounts
(b) Standard 18.2 – Account Deposits
(c) Standard 18.3 – Financial Institution Account Reconciliation
(2) FMB’s Financial Administration Law Standards
(a) Standard 16.1 – Funds and Revenues
(b) Standard 16.2 – Expenditures
8. Attachments
Appendix A – Financial Institution Account Reconciliation Template
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Appendix A – Financial Institution Account Reconciliation Template
[♦] First Nation
Financial Institution Account Reconciliation
Month: xxxx, 20xx
Financial Institution name: ABC Bank
Financial Institution account name: xxxx, xxxxx
Financial Institution account #: 000-0000-000
GL #: 12345
Ending bank balance
$ xxxx.xx
ADD: Deposits in transit
$xx.xx
xx.xx
LESS: Outstanding cheques
Cheque No.
Amount
###
xxx.xx
###
xx.xx
###
xxx.xx
Total outstanding cheques
xxx.xx
(xxx.xx)
Adjusted bank balance
$xxxx.xx
Ending general ledger (GL) balance
$ xxxx.xx
ADD/LESS: Unrecorded transactions
Monthly bank fee
(x.xx)
Adjusted GL balance
$xxxx.xx
Difference:
x.xx
Prepared by: ____________________________ Title: _____________________ Date: _________
Approved by: ____________________________ Title: _____________________ Date: _________
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